The Philippines is set for a strong 2013 after registering 6.6% GDP growth in 2012, says Moody's Analytics.
The Southeast Asian country has been among the brightest parts of a generally gloomy global picture.
"Even with China’s economy slowing, the U.S. struggling to gain traction, and Europe stuck in a long-running crisis, the Philippines economy has continued to drive forward," says Glenn Levine, Senior Economist at Moody's Analytics. "The stock market has surged 23% this year after a 33% rise in 2012. Investors are bullish on the Philippines, and so are we."
Levine says the country's impressive rate of GDP growth looks sustainable, as risks are low and most sectors of the economy are growing solidly.
Construction surged 14% in 2012, while most other industries recorded solid but sustainable growth. This should continue in 2013, led by construction and business process outsourcing, which account for a sizable chunk of the Philippines' exports as less competitive industries such as electronics have receded.
On the demand side, government spending was strong in 2012, although this accounts for less than 10% of GDP. All of the other demand components recorded robust growth.
"The strong growth has taken place in an environment of falling domestic risk and low inflation," says Levine.
Inflation has stabilised near 3% per year, comfortably at the lower end of the central bank’s targeted 3% to 5% range, allowing the overnight interest rate to be cut to 3.5%. This all suggests that the current rate of growth is sustainable.
"We expect GDP growth to remain in the 6.5% to 7% range in 2013 and 2014, making the Philippines one of the world’s fastest-growing economies."